Cape Intermediate Holdings Limited v Peter D. Protopapas

The court granted declaratory and injunctive relief to the English company CIHL on the ground that the receivership order made in South Carolina could not, as a matter of English private international law, be recognised as against CIHL because there was no sufficient connection between CIHL and South Carolina. The judge treated the findings in Adams v Cape [1990] 1 Ch 433 as directly material: the South Carolina case proceeded on contentions about agency, single economic unit and veil-piercing that were previously and comprehensively rejected in Adams v Cape. The court held that a foreign receivership will be recognised here only where there is a sufficient territorial connection; applying that test the South Carolina receivership lacked the requisite connection to CIHL.

The court rejected reliance on a litigation estoppel in the form sought by the claimants as a free-standing basis to defeat the receiver’s acts, but accepted that the receiver’s adoption of the factual and legal stance contrary to Adams v Cape was relevant to considerations of abuse and to the scope of relief. An injunction was granted restraining the receiver from purporting to act for CIHL, with declarations to the same effect, and the judge concluded that comity did not preclude relief of this kind so far as the receiver’s conduct in litigation and acts affecting CIHL worldwide (including in South Carolina) were concerned. Cape Jersey did not obtain relief on the evidence before the court.

The claimants (CIHL and Cape Jersey) sought declarations and worldwide injunctions to the effect that a receivership order made in the Court of Common Pleas for the Fifth Judicial Circuit of South Carolina on 16 March 2023 appointing Mr Peter Protopapas as receiver had no legal effect in England and Wales, and that Mr Protopapas had no authority to act as receiver of the claimants in England and worldwide.

The factual background was that the South Carolina receivership had been obtained in proceedings (the Park proceedings) and the receiver had subsequently conducted and commenced further proceedings (including third‑party claims and claims such as the Tibbs action) on a factual and legal footing directly contrary to the findings in Adams v Cape. The judge who appointed and supervised the receivership in South Carolina was Chief Justice Toal; the receiver has acted vigorously and expansively, including issuing admissions and third party claims on behalf of the company said to be ‘‘Cape plc’’ (a misnomer, the court concluded, for CIHL). The claimants relied on the English authority in Adams v Cape which had decided, after extensive fact‑finding, that CIHL was not present in the United States through NAAC, CPC or related entities; the claimants said the South Carolina proceedings revived theories rejected in Adams and thus risked serious disruption to CIHL and the wider group.

Issues framed by the court:

• Whether a receiver appointed by a foreign court is capable of being recognised in England in respect of assets and corporate governance of an English company, and if so on what test;
• Whether the South Carolina receivership over CIHL met that test (the ‘‘sufficient connection’’ test derived from Schemmer and related authorities);
• Whether the receiver’s adoption of a factual and legal position contrary to Adams v Cape gave rise to estoppel or abuse of process and whether that justified relief;
• Whether it was appropriate, consistent with comity, to grant declarations and worldwide injunctions restraining the receiver, including in respect of litigation in South Carolina.

Reasoning and conclusions:

• The governing private international law principle is that the English court will recognise the title of a foreign receiver or set up an auxiliary receivership only where there is a sufficient connection between the defendant (the company) and the jurisdiction of the appointing court. Schemmer v Property Resources Ltd [1975] 1 Ch 273 was applied to that end.
• On the facts established in Adams v Cape (accepted by the judge), CIHL did not have the requisite presence in the United States; NAAC and CPC were independent entities whose relationships with CIHL did not amount to presence, alter‑ego or agency sufficient to found recognition of the South Carolina order.
• The court accepted that the receiver and the South Carolina court might properly consider the receivership lawful under South Carolina law, but that did not entitle the receiver to act as agent of CIHL in England or to marshalled worldwide assets where English law would not recognise his authority.
• The argument that a litigation estoppel (or estoppel by conduct) prevented the receiver from adopting the contrary position was not a sufficient independent basis for relief in the English proceedings: estoppel of that character operates in inter partes litigation and did not by itself displace the private international law analysis.
• Given the real risks of irreparable and serious prejudice to CIHL and the group flowing from the receiver’s worldwide litigation and admissions, and having assessed comity concerns, the judge concluded that declarations and injunctions should be granted to restrain the receiver from acting or purporting to act as CIHL’s receiver in England and worldwide and from litigating as CIHL or ‘‘Cape plc’’ in ways that bind CIHL; Cape Jersey was not granted relief on the evidence.

First instance: the court granted the claimants declaratory and injunctive relief in respect of CIHL. Rationale: the South Carolina receivership could not properly be recognised against CIHL under English private international law because there was no sufficient connection with South Carolina (Adams v Cape and Schemmer applied); the receiver’s adoption of a contrary factual and legal stance compounded the risk of serious prejudice; estoppel did not operate to displace the recognition analysis; and, after careful consideration of comity, the court concluded that declarations and injunctions (including restraining the receiver from acting for CIHL in litigation) were necessary and proportionate to protect CIHL’s legitimate interests. Relief for Cape Jersey was not granted on the material before the court.